Consultants battle for thought leadership in digital transformation

19 December 2017 8 min. read
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New data has revealed how major consulting firms are embracing and using digital transformation in their offerings. Analysis shows that a battle is raging between top consultancies to win the race for lucrative digital transformation work.

Technology is disrupting every industry, with new competitors pushing established market incumbents to invest huge sums in digital transformation strategies, as they attempt to minimise their loss of market share. As these clients turn to consultants, digital transformation consulting is booming. The digital transformation consulting market is worth $23 billion today, and represents more than 15% of the entire consultancy industry globally. To win as large a slice of this pie as possible, consultancies are increasingly trying to position themselves as experts on digital transformation.

Digital transformation

A new analysis by Waymark Tech, a small tech firm based in Thame, Oxfordshire, shows that eight large consultancies have upped their use of the term ‘digital transformation’ by 513% since 2014, with the majority of this uptick taking place between 2016 and 2017. The researchers took this data from how many times the consulting firms had mentioned the term ‘digital transformation’ in their online literature, believing that this gave the best proxy to conclude who is positioning themselves most effectively and aggressively in the marketplace.

“Given the booming demand for digital services, it is no surprise that research shows that the major global consultancies have changed the language on their websites and in their reports to focus on digital transformation,” said Mark Holmes, CEO and founder of Waymark Tech.Number of digital mentions by eight leading consulting firmsThe consulting firms taken under scrutiny were: Accenture, Bain & Co., Booz Allen, Deloitte, EY, KPMG, McKinsey & Company, PwC, which represent seven of the globe’s 10 largest consulting firms. Bain is only player studied here that is not placed in the world’s top 10, based on data from Gartner, although the firm follows closely after.

Analysis reveals that from a relatively modest starting position of fewer than 500 mentions, ‘digital transformation’ doubled by 2015 to around 1,000 mentions – plateauing for a year, before being forecast to have hit over 2,000 mentions by the end of the year. It’s leap in popularity is only surpassed by FinTech, as a rising theme, with the new financial technology coming into vogue around the same time, although it is currently expected to surpass 2,500 mentions by the end of 2017. The eight firms analysed are considerably less excitable surrounding RegTech, with the regulatory technology standing to hit around 1,000 mentions, at the most modest growth rate of three concepts considered by Waymark.

According to the firm’s analysis, Big Four firm KPMG are far and away the most consistent with their mentioning of digital transformation. The professional services giants used the term 604 times, according to Waymark’s data, more than any other firm.

Accenture and PwC also utilised the term regularly, at 453 and 435 times each. Booz Allen, the consultancy with the smallest revenue under study, was also the firm which mentioned the concept least. However, the authors highlighted that they are playing catchup, ramping up messaging around transformation significantly during the second half of this year.Number of ‘digital transformation’ mentions by consulting firms

FinTech and RegTech

The researchers performed the same analysis for two other major buzzwords in digital domain: ‘FinTech’ and ‘RegTech’, finding that mentions for ‘FinTech’ and ‘RegTech’ were up 397% and 446% respectively.

Much of the discussion among consultancies around digital transformation has focused on FinTech advisory. This is not a surprise, given estimates that financial services constitute more than a quarter (26%) of the global consulting industry. According to the analysis, this has also been reflected in consultancies’ websites. The term ‘FinTech’ is now being used nearly 400% more frequently than just three years ago.

While KPMG also topped the list overall with research showing it hit more than 620 mentions this year, the firm is forecast to forfeit its leading position to Deloitte over the coming year. Accenture, Deloitte and EY all recorded over 400 forecast mentions of the terms on their websites, as did PwC, which launched its own Global FinTech Report this year, alongside rival KPMG, which launched its own Pulse of Fintech report. The position of ‘thought leaders’ is increasingly coveted by consulting firms looking to differentiate their output from the host of competitors also vying for lucrative digital work – and the Big Four of KPMG, EY, PwC and Deloitte seem to excel at this, dominating rankings of best FinTech and InsurTech reports, recently.

By contrast, McKinsey & Company, Bain & Co, and Booz Allen have all chosen not to position themselves as aggressively so far, with less than 100 mentions each.Number of FinTech and RegTech mention by consultancies

The market for RegTech is smaller but also a field of huge promise for consultants, particularly thanks to the approach of the major GDPR legislation. For financial institutions, the cost of compliance has already risen dramatically in recent times, due to a whole raft of new and substantial regulations such as MiFID in the EU. In this rapidly changing environment, banks have been on the lookout for external advice to leverage technology to manage the rising tide of regulatory costs. RegTech can help them improve this.

RegTech is emerging as a growth advisory area for consultancies Although RegTech was less well known than FinTech, awareness has risen dramatically over the last year. Across the consultancies that we studied, RegTech was mentioned 221 times online and in collateral by consultancies in 2014, against 559 mentions of FinTech in the same year. Use of the term RegTech has now risen nearly 450% over the last four years, with mentions expected to top out at 1,000 by the end of this year.

Volume versus quality

Ultimately, it is hard to tell just what implications the usage of the terms have regarding the quality of services provided. While a heavier emphasis on digital transformation might indicate that the concept is at the front of a consultancy’s mind and values, their marketing output is entirely about what they think will best reach clients in the end. In terms of how effective the use of these terms have been in achieving that, it is also far from conclusive. For instance, while McKinsey’s latest study on impact of the automation on jobs – which found that up to one fifth of the global work force will be affected by global automation – was a major piece of thought leadership that gained global attention, helping reach clients beyond the firm’s usual avenues, a number of similar studies from the Big Four have failed to gain the eminence they had hoped for.

One reason for this may be that quality, rather than quantity, is the key to fame in thought leadership. There are analyst firms that track the quality of thought leadership, such as the Think Tanks and Civil Societies Program, which evaluates the standards of research. It found that McKinsey is #1 globally. They were followed by A.T. Kearney and EY, the only member of the Big Four to grace the top ten. More specific to consulting industry, Source Global Research has its own quality metric, although it does not feature a granular breakdown. So, for now, assessing the quality of such work beyond arbitrary rankings remains difficult.

Going forward, Mark Holmes said that irrespective of the volume versus quality discussion, digital transformation will become more and more important. As markets become bigger and draw more attention, space for digital transformation attention will be crowded and competitive. “Consultancies increasingly want to grow their revenue and position themselves effectively to take advantage of this growing source of work. With the market expected to boom this is understandable,” he concluded.